UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
Commission File No. 333-94265
Liska Biometry, Inc.
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(Exact Name of small business issuer as specified in its charter)
FLORIDA 06-1562447
- -------------------------------------- ----------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Main Street Suite 230
Dover, New Hampshire, 03820
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(Address of Principal Executive Offices)
1 877 77 LISKA
(Telephone number, including area code, of agent for service)
Copies to:
Virginia K. Sourlis, Esq.
The Galleria
2 Bridge Avenue
Red Bank, NJ 07701
(732) 530-9007 Fax (732)
530-9008 www.SourlisLaw.com
Registrant has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and has been
subject to such filing requirements for the past 90 days. |X| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2005, we had 26,291,263 shares of our common stock
outstanding.
LISKA BIOMETRY, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet (Unaudited) 3
Statements of Operations (Unaudited) 4
Statements of Cash Flows (Unaudited) 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis or Plan of Operations 7
Item 3 - Controls and Procedures 15
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 18
2
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 2005
(Unaudited)
Assets
Current assets:
Cash $ 11,726
Prepaid expenses 1,042
Miscellaneous receivables 6,836
-----------
Total Current Assets 19,604
-----------
Fixed assets, net 57,657
-----------
Other assets:
Deposits 21,502
-----------
$ 98,763
===========
Liabilities and stockholders' (deficit)
Current liabilities:
Accounts payable & accrued expenses $ 360,306
Due to investors 55,000
-----------
Total current liabilities 415,306
-----------
Stockholders' (deficit):
Preferred stock, no par value,
10,000,000 shares authorized, none outstanding --
Common stock, no par value,
100,000,000 shares authorized,
26,291,263 shares issued and outstanding 8,641,550
Common stock subscriptions 20,000
Additional paid in capital 933,203
Deferred compensation (25,250)
(Deficit) accumulated during the development stage (9,868,678)
-----------
(299,175)
Other comprehensive income:
Currency translation adjustment (17,368)
-----------
(316,543)
-----------
$ 98,763
===========
See the accompanying notes to the consolidated financial statements.
3
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Three Months Ended September 30, 2004 and 2005,
Nine Months Ended September 30,
2004 and 2005, and Inception
(August 1, 2000) to September
30, 2005
(Unaudited)
Three Months Three Months Nine Months
Ended Ended Ended
September 30, September 30, September 30,
2004 2005 2004
------------------ ----------------- -----------------
Sales $ - $ - $ -
Cost of goods sold - - -
------------------ ----------------- -----------------
Gross profit - - -
------------------ ----------------- -----------------
Operating expenses:
Impairment of license - - -
Selling, general and
administrative expenses -
Non cash stock compensation 642,542 59,083 3,482,542
Selling, general and
administrative expenses 69,126 473,669 286,465
------------------ ----------------- -----------------
711,668 532,752 3,769,007
------------------ ----------------- -----------------
(Loss) from operations (711,668) (532,752) (3,769,007)
------------------ ----------------- -----------------
Other income (expense):
Other income - - -
------------------ ----------------- -----------------
Net (loss) (711,668) (532,752) (3,769,007)
Other comprehensive income:
Foreign currency translation
adjustment (2,453) (9,769) 600
------------------ ----------------- -----------------
Comprehensive (loss) $ (714,121) $ (542,521) $ (3,768,407)
================== ================= =================
Per share information - basic and fully diluted:
Weighted average shares outstanding 21,009,578 26,058,726 18,767,692
================== ================= =================
Net (loss) per share
$ (0.03) $ (0.02) $ (0.20)
================== ================= =================
Nine Months Inception
Ended to
September 30, September 30,
2005 2005
-- --
Sales $ -- $ 8,000
Cost of goods sold -- 892
------------ ------------
Gross profit -- 7,108
-- --
Operating expenses:
Impairment of license -- 58,812
Selling, general and
administrative expenses -
Non cash stock compensation 815,545 4,511,478
Selling, general and
administrative expenses 1,053,740 5,305,746
------------ ------------
1,869,285 9,876,036
------------ ------------
(Loss) from operations (1,869,285) (9,868,928)
-- --
Other income (expense):
Other income -- 250
-- --
Net (loss) (1,869,285) (9,868,678)
Other comprehensive income:
Foreign currency translation
adjustment (16,037) (17,368)
------------ ------------
Comprehensive (loss) $ (1,885,322) (9,886,046)
============= ==============
Per share information - basic and fully
Weighted average shares outstanding 25,376,716
============
Net (loss) per share
$ (0.07)
============
See the accompanying notes to the consolidated financial statements.
4
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2004 and 2005, and
Inception (August 1, 2000) to September 30, 2005
(Unaudited)
Nine Months Nine Months Inception to
Ended September30, Ended September 30, September 30,
2004 2005 2005
----------- ----------- -----------
Cash flows from operating activities:
Net cash (used in) operating activities $ (283,117) $ (836,541) $(1,631,997)
----------- ----------- -----------
Cash flows from investing activities:
Net cash (used in) investing activities (11,300) (44,322) (118,857)
----------- ----------- -----------
Cash flows from financing activities:
Capital contributions -- -- 8,878
Common shares issued and subscriptions for cash 356,912 674,500 1,898,702
Common shares repurchased for cash (50,000) -- (200,000)
Net proceeds (payments) from (on) investor loans 49,827 (27,552) 55,000
----------- ----------- -----------
Net cash provided by financing activities 356,739 646,948 1,762,580
----------- ----------- -----------
Net increase (decrease) in cash 62,322 (233,915) 11,726
Beginning - cash balance 843 245,641 --
----------- ----------- -----------
Ending - cash balance $ 63,165 $ 11,726 $ 11,726
=========== =========== ===========
Supplemental cash flow information:
Cash paid for income taxes $ -- $ -- $ --
=========== =========== ===========
Cash paid for interest $ -- $ -- $ --
=========== =========== ===========
5
LISKA BIOMETRY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(UNAUDITED)
(1) Basis Of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and Item 310(b) of Regulation S-B. They do not include all
of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of the Company as of December 31,
2004, and for the two years then ended, and the period from inception (August 1,
2000) to December 31, 2004, including notes thereto included in the Company's
Form 10-KSB.
(2) Earnings Per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods when they would be anti-dilutive common stock
equivalents, if any, are not considered in the computation.
(3) Commitments and Contingencies
During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply and this could have a material negative
impact on the Company's financial position and results of operations. In
addition, the Company issued shares of common stock pursuant to Form S-8
registration statements. The Company believes that it complied with the
requirements of Form S-8 in regard to these issuances, however if it were
determined that there were violations of the provisions of Form S-8 the Company
could be subject to enforcement proceedings.
During the periods covered by these financial statements the Company entered
into several employment, consulting and other agreements with third parties.
Although the Company obtained settlement releases from a majority of the
parties, settlement releases were not entered into with some of these parties or
the settlement releases were verbal agreements. Future contingencies, which
cannot be estimated by management, may exist for the above matters including but
not limited to issuance of capital stock and other financial obligations and may
have a material negative impact on the Company's financial position and results
of operations.
At September 30, 2005, the Company and its subsidiary had entered into
employment contracts of varying terms ending from September 2005 through
November 2006 with six officers and senior executives for annual compensation
aggregating approximately $385,000. In addition these officers received an
aggregate of 2,255,000 shares of common stock (see Note 4). One of these
officers has also received options to purchase a total of 400,000 common shares
as a result of reaching certain performance targets during the contract term
that ended September 2005. This contract was subsequently renewed.
6
At September 30, 2005 the Company had entered into consulting contracts of
varying terms ending from May through November 2006 with various employees and
consultants for varying fees depending upon services rendered. One of these
employment contracts provide that the consultants may also receive options to
purchase a total of 250,000 common shares depending upon reaching certain
performance targets during the contract term that ends November 2005.
(4) Stockholders' (Deficit)
During the nine months ended September 30, 2005 the Company issued 621,346
shares of common stock which had been subscribed for at December 31, 2004.
During the nine months ended September 30, 2005, the Company issued 1,991,162
shares of common stock for services including services rendered or to be
rendered pursuant to employment and consulting contracts. The shares were valued
at their fair market value of $773,378, of which $748,128 has been charged to
operations and $25,250 has been recorded as deferred compensation related to
services not yet provided. In addition, $67,417 previously recorded as deferred
compensation at December 31, 2004, has been amortized to operations over the
term of certain consulting and employment contracts.
During the nine months ended September 30, 2005, the Company also accepted
subscriptions for 2,016,254 shares of common stock at prices ranging from $.20
to $.38, for cash aggregating $674,500 of which 75,000 shares ($20,000) have not
been issued at September 30, 2005, and have been recorded as common stock
subscriptions.
During July 2005, the Company cancelled 1,871,666 treasury shares.
During the nine months ended September 30, 2005, the Company issued an aggregate
of 975,000 options to employees exercisable for a period of ten years at
exercise prices ranging $.32 to $.61.
SFAS 123 requires the Company to provide proforma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the Black-Scholes option pricing model with the
following weighted average assumptions for grants during the period ended
September 30, 2005: expected life of options of 10 years, expected volatility of
99% to 208%, risk-free interest rate of 3% and no dividend yield. The weighted
average fair value at the date of grant for options granted during the nine
months ended September 30, 2005, approximated $0.36 per option. These results
may not be representative of those to be expected in future years.
Under the provisions of SFAS 123, the Company's net income (loss) and earnings
(loss) per share would have been reduced (increased) to the pro forma amounts
indicated below for the period ended September 30, 2005:
Net (loss)
As reported $(1,869,285)
Pro forma $(2,054,285)
Basic and diluted (loss) per share
As reported $(.07)
Pro forma $(.08)
7
A summary of stock option activity is as follows:
Weighted Weighted
Number average average
of exercise fair
shares price value
------ ------ -----
Balance at
December 31, 2004 350,000 $.64 $1.00
Granted 2005 975,000 $.38 $ .36
Exercised/Forfeited --
---------------
Balance at
September 30, 2005 1,325,000
=========
The following table summarizes information about fixed-price stock options at
September 30, 2005:
Outstanding
Weighted Weighted Weighted-
Average Average Average Exercisable
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
$.32 295,000 10 years $.32 - $ .32
$.39 650,000 10 years $.39 - $ .39
$.61 30,000 10 years $.61 - $ .61
$.64 to $.65 350,000 9 years $.64 350,000 $ 1.00
(5) Basis of Reporting
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The Company has experienced a significant loss from operations as a result of
its investment necessary to achieve its operating plan, which is long-range in
nature. For the nine months ended September 30, 2005, and the period from
inception to September 30, 2005, the Company incurred net losses of $1,869,285
and $9,868,678 respectively and has working capital and stockholder deficits of
$395,701 and $316,543 respectively at September 30, 2005. In addition, the
Company has no revenue generating operations.
The Company's ability to continue as a going concern is contingent upon its
ability to attain profitable operations and secure financing. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates.
The Company is pursuing equity financing for its operations. Failure to secure
such financing or to raise additional capital or borrow additional funds may
result in the Company depleting its available funds and not being able pay its
obligations.
8
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
(6) Subsequent Events
During October and November 2005, the Company issued 725,000 shares of common
stock for cash aggregating $181,250. In addition the shares subscribed for at
September 30, 2005, were issued.
During October 2005, the Company signed a securities purchase agreement for the
issuance of 5 million shares of common stock at $0.275. To date the shares have
been issued, but the cash proceeds have not been received.
Item 2 Management's Discussion and Analysis or Plan of Operation
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 and is subject to the safe harbor created by those sections. We intend
to identify forward-looking statements in this report by using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," "estimates," "predicts," "potential," "continue,"
or similar terminology. These statements are based on the Company's beliefs as
well as assumptions the Company made using information currently available to
us. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Because these statements reflect the Company's current
views concerning future events, these statements involve risks, uncertainties,
and assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements. These risks include changes in
demand for the Company's products, changes in the level of operating expenses,
changes in general economic conditions that impact consumer behavior and
spending, product supply, the availability, amount, and cost of capital for the
Company and the Company's use of such capital, and other risks discussed in this
report. Additional risks that may affect our performance are discussed under
"Risk Factors Associated with Our Business" in our Form 10-KSB for the fiscal
year ended December 31, 2004. Readers are cautioned not to place undue reliance
on the forward-looking statements contained in this report. We disclaim any
obligation to update forward-looking statements. All references to "we", "our",
"us", of refer to Liska Biometry, Inc., and it predecessors, operating
divisions, and subsidiaries.
CRITICAL ACCOUNTING POLICIES
There were no changes to the Company's critical accounting policies in the third
quarter of 2005. Critical accounting policies are those applications of
accounting principles or practices that require considerable judgment,
estimation, or sensitivity analysis by management.
9
PLAN OF OPERATIONS
We plan to complete our current Plan of Operations over a period of six to 12
months. At the present time we do not have sufficient cash resources to complete
our Plan of Operations. We have not had sufficient cash resources to conduct our
Plan of Operations since we adopted our new business plan of developing
fingerprint encoding and authentication technology. Therefore, full
implementation of our Plan of Operations is contingent upon receiving adequate
financing to meet the remaining costs of our estimate of $4,500,000
Our Plan of Operations (on a consolidated basis) to Date:
RESEARCH AND DEVELOPMENT
In January 2003 we developed a preliminary demonstration model of our proposed
fingerprint technology, which provided only a conceptual guide for future
development. We continued our development throughout 2003 and attempted to
improve our core technology and implement changes in our core software; however,
most of our development occurred from September 2004 to June 2005, in which we
made further changes to our core software. As reflected below in our Plan of
Operations, we will continue to develop our core technology incrementally as
financing becomes available.
DEVELOPED SOFTWARE ALGORITHMS
Using third party live-scan fingerprint scanners, we can now demonstrate the
proof of concept of our proprietary software concepts, illustrating the
differentiating features of embedded software algorithms - that is, the
capability to measure the stable content of a fingerprint image and to express
it as a short numeric output. A final workable prototype model is contingent
upon us receiving financing, which we may be unable to obtain. We have expended
approximately $6,000 for the aforementioned.
APPOINTED EXECUTIVE MANAGEMENT TEAM
We have filled the following executive management positions to our consolidated
operation:
Position Annual Salary (Consolidated Basis)
Chief Executive $90,000
Chief Financial Officer and President $85,000
of Liska Biometry
(Canada) Inc.
We estimate that our annual salary expenditures for these positions will be
$175,000.
CAPITAL EXPENDITURES
We have purchased capital equipment for our research and development and general
operations, which consists primarily of computer hardware. We estimate the
remaining cost of our needed equipment to be approximately $40,000.
HIRED VICE PRESIDENT OF PRODUCT OPERATIONS
We have hired one individual who is responsible for the product operations
oversight of the Company. The annual salary costs associated with this position
is approximately $80,000.
10
HIRED A CHIEF SOFTWARE ARCHITECT
We have hired an individual who is responsible for leading the research and
development of the Company's intellectual property and core software algorithms
The annual salary costs associated with this position is approximately $70,000.
HIRED A CHIEF ENGINEER
We have hired an individual who is responsible for implementing the technology
integration and designing the Company's product applications.
The annual salary costs associated with this position is approximately $70,000.
HIRED A HUMAN RESOURCE MANAGER
We have hired one individual who is responsible for all human
resource/administrative functions of the Company.
The annual salary costs associated with this position is approximately $60,000.
HIRED A FINANCIAL CONTROLLER/ SENIOR FINANCIAL ADVISOR
We have hired one individual on a part-time basis who is responsible for the
financial accounting, audit procedures and the internal financial controls as
well as advising the executive management on the financial management of the
Company.
The annual salary costs associated with this position is approximately $60,000.
HIRED AN RESEARCH & DEVELOPMENT TEAM
We have hired individuals to fill the following positions:
o Senior Technical Support Engineer
o Senior Security Systems Engineer
o Network Communication and Security Development Engineer
o Senior Software Programmer
o One part-time programmer
Several of these individuals have been reallocated to roles in business
development, The estimated annual salary cost associated with those remaining is
$220,000.
HIRED A SENIOR VICE-PRESIDENT OF OPERATIONS AND DIRECTOR OF BUSINESS DEVELOPMENT
We hired an individual who is responsible for implementing the US-based sales,
marketing, and business development initiatives of the Company and implementing
operational strategies in concert with the CEO and CFO of the Company. This
individual oversees the operational implementation of the Company's business
plan and manages its US-based operational units.
The estimated annual salary costs associated with this position is approximately
$70,000.
11
HIRED A VICE-PRESIDENT OF REGIONAL SALES FOR THE MIDDLE EAST
We hired an individual who is responsible for implementing the Middle Eastern
based sales and business development initiatives of the Company.
The estimated annual salary costs associated with this position is approximately
$60,000.
HIRED A VICE-PRESIDENT OF SALES & MARKETING
We hired an individual who is responsible for implementing the Canadian based
sales, marketing, and business development initiatives of the Company.
The estimated annual salary costs associated with this position is approximately
$65,000.
HIRED AN ADMINISTRATOR & BOOK KEEPER
We hired an individual to be responsible for all of the administrative functions
at the Company's head office in Dover, New Hampshire.
The estimated annual salary costs associated with this position is approximately
$40,000.
HIRED A VICE PRESIDENT OF GLOBAL SOLUTIONS
We hired an individual who will be responsible for implementing the Company's
customized solutions segment marketing and business development strategy.
The estimated annual salary costs associated with this position is approximately
$80,000.
Our Future Plan of Operations:
HIRE A CHIEF TECHNOLOGY OFFICER
We plan to hire an individual who will be responsible for overseeing all of the
Company's R&D functions at its facilities in Ottawa, Canada.
The estimated annual salary costs associated with this position is approximately
$70,000.
HIRE A PRODUCT DEVELOPMENT/INTEGRATION TEAM
We plan to hire a team individuals who will be responsible for product
development, quality assurance and testing, project implementation and
programming.
The estimated annual salary costs associated with this team is approximately
$975,000.
12
GENERAL & ADMINISTRATIVE EXPENSES
We intend to expend funds for general and administrative expenses such as:
insurance expense, payroll tax, rent expense, legal expenses, professional fees,
telephony and internet access, travel & entertainment, payroll expenses,
professional fees and offices expenses.
The remaining estimated annual costs associated with these expenditures is
approximately $978,000
ENGAGE BUSINESS DEVELOPMENT CONSULTANTS
As part of our overall marketing strategy, we intend to hire business
development consultants who are able to advance our marketing plan and establish
material business relationships for our marketing personnel.
The estimated annual costs associated with these expenditures is approximately
$75,000
DEVELOP AND INITIATE MARKETING EFFORT
Our marketing personnel have conducted a preliminary market analysis and have
developed a market segmentation strategy that allows for product diversification
and expansion while remaining close to our core technological expertise.
o Horizontal Segmentation: the Company intends to promote wide-spread
acceptance of the BIN(TM) concept for large scale ID management
projects via a software product offering and IP licensing model. The
focus is on large government and enterprise security contracts, both
in North America and abroad.
o Vertical Segmentation: the Company intends to build its industry
credibility by providing customized niche applications for specific
BIN(TM) related applications in direct response to customer's
requests. These applications will be domain/industry specific and
will entail a large service component. The focus is on small, high
probability pilot and private enterprise contracts for access
control, fleet management security and transaction authentication
for financial institutions.
We will continue to develop strategic partner alliances to collaborate on our
marketing and technological integration efforts. Such strategic partners may
include the following:
o Fingerprint biometrics hardware system vendors;
o Systems Integrators, defense contractors
o Original Equipment Manufacturers (OEMs), Channel Partners
o Other distribution channels that target military and commercial
security markets.
We intend to intensify our foreign sales and marketing efforts in Europe, Canada
and the Middle East where we have received a significant reception for our
customized solutions offerings.
In addition, we will acquire other market information and contacts by joining
key industry groups and hiring industry analysts, attending trade shows,
traveling to meet potential clients/partners and designing print media/web based
promotional strategies.
The annual cost associated with this marketing effort is approximately $950,000.
13
EXPAND OUR PRODUCT APPLICATIONS INITIATIVES AND RESEARCH AND DEVELOPMENT
We will continue to develop our initial proprietary software algorithms, with
several iterations planned for 2005. Our goal in this regard is to reach the
proof of concept stage, illustrating the differentiating features of these new
embedded software algorithms, focusing on real-time fingerprint biometric
database search. The remaining annual cost associated with expanding the product
application and R&D functions is approximately $360,000.
SUMMARY OF ESTIMATED COSTS
- --------------------------------------------------------------------------
Executive Management $ 175,000
- --------------------------------------------------------------------------
Capital Expenditures 40,000
- --------------------------------------------------------------------------
VP Product Operations 80,000
- --------------------------------------------------------------------------
Chief Software Architect 70000
- --------------------------------------------------------------------------
Chief Engineer 70,000
- --------------------------------------------------------------------------
Human Resource Manager 60,000
- --------------------------------------------------------------------------
Financial Controller/Senior Financial Advisor 60,000
- --------------------------------------------------------------------------
Engineering Team 220,000
- --------------------------------------------------------------------------
Director of Business Development 70,000
- --------------------------------------------------------------------------
VP Regional Sales 60,000
- --------------------------------------------------------------------------
VP Sales & Marketing - Canada 65,000
- --------------------------------------------------------------------------
Executive Assistant/Bookkeeper 40,000
- --------------------------------------------------------------------------
VP Global Solutions 80,000
- --------------------------------------------------------------------------
Product Development/Integration Team 975,000
- --------------------------------------------------------------------------
Business Consultants 75,000
- --------------------------------------------------------------------------
Initiate Marketing Effort 950,000
- --------------------------------------------------------------------------
Chief Technology Officer 80,000
- --------------------------------------------------------------------------
General & Administrative 978,000
- --------------------------------------------------------------------------
Expand Product Application Initiatives 360,000
- --------------------------------------------------------------------------
TOTAL $ 4,508,000
- --------------------------------------------------------------------------
REVENUES
We cannot determine whether our revenues, if any, will ever be sufficient to
produce a positive cash flow or result in net profits. You should carefully
consider the discussion appearing below under "Liquidity and Capital Resources".
We earned no revenues during Fiscal Year 2004 or to date in Fiscal Year 2005 or
in connection with our business plan of developing fingerprint encoding and
authentication technology. We do not expect to earn significant operating
revenues in the foreseeable future. Our losses are expected to continue,
principally as a result of our estimated expenditures of $4,500,000, as
reflected above.
14
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2005, we had limited cash resources of only $11,726. We do
not have any other internal sources of working capital. We did not receive any
revenues during our Fiscal Year 2004 or to date in Fiscal Year 2005. We do not
anticipate earning revenues until such time that we obtain financing to
implement our Plan of Operations, if ever. Even if we complete our Plan of
Operations, there are no assurances that we will successfully develop a
marketable product.
During Fiscal Year 2004 and date in Fiscal Year 2005, our operating expenses
have exceeded our revenues, which has been $0. We have insufficient working
capital to fund our planned growth and ongoing operating expenses. As a result,
we expect to continue to experience significant negative operating cash flow for
the foreseeable future. Our existing working capital will not be sufficient to
fund the continued implementation of our Plan of Operations during the next 12
months and to meet our general operating expenses. If we do not have sufficient
working capital to implement our Plan of Operations, we may have to cease
operations.
We have no alternative Plan of Operations. In the event that we do not receive
financing, if our financing is inadequate or if we do not adequately implement
an alternative Plan of Operations that enables us to conduct operations without
having received adequate financing, we may have to liquidate our business and
undertake any or all of the following actions:
o Sell or dispose of our assets, if any;
o Pay our liabilities in order of priority, if we have available cash
to pay such liabilities;
o If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal
to the net market value of our net assets;
o File a Certificate of Dissolution with the State of Florida dissolve
our corporation and close our business; and
o Make the appropriate filings with the Securities and Exchange
Commission so that we will no longer be required to file periodic
and other required reports with the Securities and Exchange
Commission, if, in fact, we are a reporting company at that time
Based upon our current assets, however, we will not have the ability to
distribute any cash to our shareholders.
If we have any liabilities that we are unable to satisfy and we qualify for
protection under the U.S. Bankruptcy Code, we may voluntarily file for
reorganization under Chapter 11 or liquidation under Chapter 7. Our creditors
may also file a Chapter 7 or Chapter 11 bankruptcy action against us. If our
creditors or we file for Chapter 7 or Chapter 11 bankruptcy, our creditors will
take priority over our shareholders. If we fail to file for bankruptcy under
Chapter 7 or Chapter 11 and we have creditors, such creditors may institute
proceedings against us seeking forfeiture of our assets, if any.
We do not know and cannot determine which, if any, of these actions we will be
forced to take.
If any of these foregoing events occur, you could lose your entire investment in
our shares.
There is substantial doubt about our ability to continue as a going concern as
we have suffered recurring losses from operations and have no established source
of revenue. Accordingly, our independent auditors included an explanatory
paragraph in their report on our December 31, 2004 financial statements
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors.
15
Item 3 Controls and Procedures
We maintain and are currently undertaking actions to improve disclosure controls
and procedures designed to ensure that information required to be disclosed in
reports filed under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the specified time periods.
As of the end of the period covered by this report, the Corporation's Chief
Executive Officer and Chief Financial Officer ("CEO and CFO") evaluated the
effectiveness of the Corporation's disclosure controls and procedures. Based on
the evaluation, our CEO and CFO have discovered a potential material weakness in
our disclosure controls as they relate to the documents supporting the issuance
of equity securities. Our CEO and CFO believe that the weaknesses did not affect
the reporting or disclosure in our annual or quarterly reports due to controls
put in place during the current quarter and compensating controls, such as the
detailed review of these areas subsequent to the time at which the agreements
were entered into and during the preparation of our quarterly and annual
reports.
These weaknesses are currently being addressed and actions are currently
being taken to improve our disclosure controls and procedures; and our CEO and
CFO have concluded that our disclosure controls and procedures, combined with
compensating controls are effective as of the end of the period covered by this
report in that information required to be disclosed in this 10QSB has been
recorded, processed, summarized and reported properly within the current fiscal
year. Although there was a change in our disclosure controls and procedures
during the quarter, there were no changes in our internal control over financial
reporting that occurred during our most recent nine month period that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
The following is a summary of the weakness and deficiency that has been
identified and addressed:
o Deficiency related to the documentation, review and approval of
certain sales under a Regulation S sale of securities by our
authorized broker/dealer agents.
At our most recent year-end, we identified a deficiency in controls
related to documentation, review and approval of sales made under a series
of Regulation S transactions. Such deficiencies resulted in our inability
to obtain supporting documentation confirming the investor's intention to
subscribe to the shares sold despite having received the funds from the
broker/agent and despite having the certificates issued by our transfer
agent. This deficiency did not exist for the private placements affected
during the year.
As a result of the findings above, we have implemented and will continue to
implement the following actions:
o We have appointed a part-time financial controller to support the
preparation of financial statements and reports to be filed with the
SEC.
o We are establishing procedures to improve our review and processing
of non-accounting documentation and contracts, and specifically will
require adequate documentation be provided concurrently with any
future share subscriptions, regardless of type.
o We intend to periodically review our internal procedures and
controls to ensure additional enhancements to our internal controls
are installed as necessary to meet our operational needs. Outside
consultants will be engaged to advise our management as areas of
concern are identified.
o We intend to establish a Code of Ethics.
Our management is committed to a sound internal control environment. We
believe we have committed adequate resources to the aforementioned reviews and
remedies. We believe that we have addressed the issue identified above, and we
believe that we are in the process of further improving our infrastructure,
personnel, processes and controls to help ensure that we are able to produce
accurate disclosures and financial statements with appropriate supporting
documentation on a timely basis.
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PART II OTHER INFORMATION
Item 2 Changes in Securities
During the quarter ending September 30, 2005, the Company issued 125,000 shares
for services rendered.
The Company sold the following unregistered securities following the three
months ended September 30, 2005:
The issuance of these securities is claimed to be exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Regulation S as transactions by an issuer not involving a public offering.
Date of Issuance Description of Securities Issued Number of Shares Issued Purchase Price
27/07/2005 Common Shares 100,000 $38,000
27/07/2005 Common Shares 150,000 $57,000
27/07/2005 Common Shares 50,000 $15,500
08/08/2005 Common Shares 197,368 $75,000
08/08/2005 Common Shares 67,742 $21,000
08/08/2005 Common Shares 50,000 $15,500
01/09/2005 Common Shares 100,000 $31,000
16/09/2005 Common Shares 75,000 $20,000
Item 6 Exhibits and Reports on Form 8K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
3.1 Articles of Incorporation (1)
3.2 By-Laws (2)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under C the
Securities Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under C the
Securities Exchange Act of 1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to C Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to C Section 906 of the
Sarbanes-Oxley Act of 2002.
17
(1) Denotes previously filed exhibits: filed on January 7, 2000 with 3045
Corporation's Form SB-2 registration statement, file # 333-94265.
(2) Denotes previously filed exhibits: filed on May 30, 2003 with Liska
Biometry, Inc.'s Form 10-KSB for the period ended December 31, 2001.
We hereby incorporate the following additional documents by reference: (a) our
Form 10-KSB for the year ended December 31, 2004 which was filed on April 21,
2005, December 31, 2003, which was filed on April 7, 2004, for the year, ended
December 31, 2002, which was filed on July 28, 2003; and for the year, ended
December 31, 2001 which was filed on May 30, 2003; (b) our Registration
Statement on Form SB-2 and all amendments thereto which was filed on January 7,
2000 and amended on February 8, 2000, March 1, 2000, March 14, 2000, April 3,
2000, and April 4, 2000; (c) our Forms 10-QSB for the periods ended June 30,
2005 which was filed on August 16, 2005, March 31, 2005 which was filed on May
15, 2005; September 30, 2004 which was filed on November 15, 2004; June 30, 2004
which was filed on August 16, 2004; March 31, 2004 which was filed on May 19,
2004; September 30, 2003 which was filed on November 14, 2003; June 30, 2003
which was filed on August 15, 2003; March 31, 2003 which was filed on August 15,
2003; September 30, 2002 which was filed on July 28, 2003; June 30, 2002 which
was filed on May 30, 2003; March 31, 2002 which was filed on May 30, 2002; June
30, 2001 which was filed on April 4, 2002; September 30, 2001 which was filed on
April 4, 2002; March 31, 2001 which was filed on May 21, 2001; August 31, 2000
which was filed on September 15, 2000; May 31, 2000 which was filed on June 20,
2000; and February 29, 2000 which was filed on April 14, 2000.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LISKA BIOMETRY, INC.
Dated: November 11, 2005
By: /s/ Christopher J. LeClerc
------------------------------
Christopher J. LeClerc
President and CEO
(Principal Executive Officer)
By: /s/ Manoj Hippola
------------------------------
Manoj Hippola
Chief Financial Officer
(Principal Accounting Officer)
18